Answer-first summary for fast verification
Answer: The White test first estimates the model and compute the residuals. It then regresses the squared residuals on a constant, all explanatory variables, their squares, and their cross-product.
## Explanation The White test procedure consists of the following steps: 1. **Estimate the original regression model** and compute the residuals 2. **Regress the squared residuals** on: - A constant term - All original explanatory variables - The squares of all explanatory variables - All cross-products of the explanatory variables The test statistic is then computed as nR² from this auxiliary regression, where n is the sample size and R² is the coefficient of determination from the auxiliary regression. This test statistic follows a chi-square distribution under the null hypothesis of homoskedasticity. Option D correctly describes this procedure. The key points are: - We use **squared residuals** (not raw residuals) - We include **all explanatory variables, their squares, and cross-products** - We include a **constant term** This comprehensive specification allows the test to detect various forms of heteroskedasticity that might be related to the explanatory variables in nonlinear ways.
Author: LeetQuiz Editorial Team
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White (1980) proposes a simple test for heteroskedasticity, known as the White test. Which of the following statements correctly describes the procedures of the White test?
A
The White test first estimates the model and compute the residuals. It then regresses the residuals on a constant and all explanatory variables.
B
The White test first estimates the model and compute the residuals. It then regresses the residuals on a constant, all explanatory variables, their squares, and their cross-product.
C
The White test first estimates the model and compute the residuals. It then regresses the squared residuals on a constant and all explanatory variables.
D
The White test first estimates the model and compute the residuals. It then regresses the squared residuals on a constant, all explanatory variables, their squares, and their cross-product.
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